How clearly do we see the rising inequality in America? How do we feel about it? Much depends on these answers.

Summary: Among the serious problems eroding the Republic’s foundations, rising inequality of wealth & income must rank high. It’s the worst kind of problem, generating its own positive feedback (like a pebble thrown down a rocky hillside). Today we have the crack analysts of the Liscio Report look a seldom-discussed aspects of this national illness: how we see it, how we feel about it.

Contents

Today’s reading: “Recent work on income disparity”

About the Liscio Report

About the rugged individualists who built America

For more information about inequality

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(1) “Recent work on income disparity”

UC Berkeley Economics Professor Emmanuel Saez recently updated his income-share spreadsheets through 2010, using data from the IRS’s Statistics of Income Division. This series includes capital gains, which results in more dramatic swings than one sees in series that exclude them.

Including capital gains real incomes fell 17% between 2007 and 2009, the largest decline since the Great Depression. Within that the incomes of the top 1% were down 36%, largely the result of the 74% decline in realized capital gains between 2007 and 2009, while those of the lower 99% were down 12%.

Painful for all, indeed, but skewed to the upper income groups, a trend that had more than retraced itself by the end of 2010, the most recent year of IRS data. Between 2009 and 2010 the incomes of the lower 99% rose only 0.2% while the incomes of the top percentile rose 12%, meaning that close to all the over-the-year improvement in income, when adjusted for population, was captured by that top percentile, 93% of it to be exact. (See links below for more data.)

That puts some numbers on why the recovery is experienced so differently by ordinary wage earners and by elite income groups, which in turn has surely heightened public awareness of our growing income disparity.

But there’s another big question out there. Whether you’re rooting for the upper or lower percentiles, if you spend a lot of time looking at income distribution tables, you can’t help but wonder why there is so little popular support for redistribution toward the middle classes, especially as the share of income going to the wealthiest citizens has risen toward levels last seen in the Roaring Twenties:

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Piecing together what people think

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In “The American Public Looks at the Rich,” sociologists David Weakliem (Prof Sociology, U CT) and Robert Biggert (Asst Prof Sociology, Assumption College) round up a number of opinion polls on the subject taken over the last five decades and suggest some answers (unpublished draft).

We’re re-quoting their opening quote because it’s a bit hard to remember that concerns about “tyranny of the majority” related to taxation have a long history. Back in late 19th Century England, as property restrictions on voting weakened, John Stuart Mill fretted:

“… is it not a considerable danger lest [the majority] should throw…upon the larger incomes, an unfair share, or even the whole, of the burden of taxation; and having done so, add to the amount without scruple, expending the proceeds of modes supposed to conduce to the profit and advantage of the labouring class?”
— Considerations on Representative Government (1861), p. 79.

Although American workers have fought for wages, unions, and benefits, why a push for inequitable tax burdens (some would say even equitable tax burdens) on the rich feared by Mill and his colleagues has never gained traction remains an open question. After reviewing polling evidence, Weakliem and Biggert note, “There is little support for direct redirection from the rich,” and, “Even the general principle of progressive taxation does not draw clear majority support.”

The paper is thoughtful, even-handed, and a refreshing break from dreary speculation that the lower-income groups are dominated by a disproportionate share of misguided lottery enthusiasts. The comments of the authors suggest a far more complex picture.

For one thing, the authors note that Americans are not opposed to higher taxes on the rich — 59% of respondents to a 2011 poll favored higher rates for families making at least $250K — but they don’t have much faith in the government’s ability to accomplish this. In one poll that inquired about the government’s ability to provide health care, college education, day care, and a few other services, “reducing the difference between the rich and poor” was the only item for which a larger percentage had had “no confidence at all,” rather than “a great deal of confidence.”

Some are more equal than others

One pollster notes that since the 1980s “people have told pollsters that the rich, not themselves, will benefit from budget agreements. It does not seem to matter what the contents of the agreement are or whether they are negotiated by Republicans or Democrats.” Widespread belief that the rich get out of paying taxes leads respondents to believe that additional revenues intended to come from the wealthy would fall instead on the middle and lower incomes.

For another, poll respondents did not have an accurate idea of how big the current income gap is, and were in the dark concerning America’s international ranking in terms of economic equality. The authors found that although respondents were quite accurate in estimating compensation in a number of professions, they “dramatically underestimated” top executive incomes. For example, estimates of what CEOs and owners of large factories make were less than half the official estimates of actual salaries, as pieced together from a number of sources.

Additionally, the margin between what respondents think executives make and what seems fair to them is considerably smaller than the margin between what respondents think executives make and what they actually make. (The authors note that respondents might have made more accurate estimates had they been asked about entertainers and athletes, rather than business-people, and that doctors’ and lawyers’ salaries are often over-estimated.)

In a 2006 poll, the respondents optimistically gave the US a mean ranking of 15th out of 32 industrialized nations in terms of economic equality as measured by income ratios. Our actual ranking was 28th, with only Mexico, Turkey, Hong Kong and Singapore more unequal.

And for yet another, across a number of polls, respondents showed strong agreement that the possibility of earning high salaries was important to the economy as a whole, and to bringing people into professions demanding a lot of preparation. One poll found 63% agreeing that the spending of millionaires gives “employment to a lot of people,” with 23% not agreeing, and 68% agreeing that investments help “create jobs and provide prosperity,” with 19% disagreeing. A majority agree that no one would go through law or medical school unless they could earn substantially higher incomes than ordinary workers. So concerns about the negative economic effects of curtailing income inequality look to be part of the explanation for the lack of support for redistribution.

On the other hand, the authors found little support for the idea that Americans over-estimate their own standing on the income ladder, and none at all for David Brooks’s claims that 19% of Americans believe they are in the top percentile. In one older poll, 20% ranked their families as above or far above average, and 29% as below or far below average; in a newer poll 8% ranked themselves as poor, 19% as lower income, 11% as upper income, and 2% as rich. The halves don’t add up, and are skewed to the lower side. The authors note the people tend to be generous in evaluating their abilities, so perhaps there is some over-estimation, but polling evidence suggests otherwise.

The common assumption that people over-estimate upward mobility is complicated by disparate estimations of what it means to be wealthy. One study found that those making $10K a year would require only $50K, while it would take $250K for those making around $75K, so definitions of “rich” probably include moving beyond a hand-to-mouth existence. But the authors suggest that respondents are generally quite reasonable in their expectations about becoming wealthy.

Noting that 8% of households make more than $150K a year, and that one analysis of tax returns found a 50% turnover within the top 5% over ten years, the number of people who will be rich at some point is several times larger than the number who are rich at any given time. According to various polls, about 10% of respondents think it is very likely they will be rich, and about 24% that it’s somewhat likely, so they aren’t so far off.

In 2009, one set of pollsters concluded that, “Americans doggedly believe in the rags-to-riches story,” but there’s a problem with the question on which this conclusion is based: “Do you believe it is still possible to start out poor in this country, work hard, and become rich?” The authors point out that it’s certainly possible, so the correct answer in fact is yes; people answering yes may well be acknowledging that possibility, not saying it’s highly likely, just as the up to 40% who responded no were more likely commenting on the rareness of the event than the literal impossibility.

Do Americans idolize the rich?

Some have suggested that the American public tends to idolize the rich, but this was not supported in polls. First, the majority of respondents indicated they don’t find the rich that interesting, although they like to read about celebrities. A majority of respondents to an AARP poll thought being wealthy was the result of hard work rather than luck, but other polls found that percentages of people who agreed and disagreed that people worked hard for their wealth, and agreed and disagreed that the wealthy had exploited people to get where they were, were about even.

Weakleim and Biggert suggest that the number of people who dismiss luck’s importance in becoming wealthy might be unrealistically high because some people may understand “luck” to “mean completely haphazard events, rather than systematic factors such as being born in a wealthy family.”

Although a majority of respondents in one poll believe millionaires give generously to charities, 49% do not believe they feel a responsibility to society because of their wealth, 78% believe them more likely to be snobs, 66% less likely to be honest, and 54% think them more likely to be racists. So, although 61% think the very rich are more likely to be physically attractive, that hasn’t translated to general merit, so admiration for the rich does not rank high as a reason that Mill’s prediction has not come to pass.

Happy inequality

And finally the authors take on happiness. Although polls have found that large majorities believe they would be happier if they made more money, and 60% would like to be rich, only about 40% believe they would be happier if they were rich. Fifty-two percent believe the rich are no happier than they are, with only 11% thinking the rich are happier, and 35%, less happy. The authors don’t really see a contradiction here. They note that people might prefer to be rich because it would provide better benefits for their children, or that they would like to be relatively better off than they are, but not necessarily rich. In any case, the authors suggest that people are “resisting the logical consequence of the principle that money makes life better.”

Here at The Liscio Report we do all our own research and writing, do not manage other people’s money or receive any form of commission, and are beholden to no one but our subscribers and ourselves. We bring fresh perspectives to the data we analyze and are confident taking positions contrary to consensus when our proprietary data tells us to do so.

Our insights are regularly picked up in Barron’s, CNBC, and other publications. Additionally, we make occasional television appearances (most recently on CNBC and Bill Moyers), and were ranked by MSN Money in the top five of their annual “Best of the Best” Awards.

John Liscio founded the Report in 1992. Philippa Dunne and Douglas Henwood were John Liscio’s closest associates and, since John’s untimely death in 2000, are honored to be carrying on the research techniques he pioneered.

America was built to a large extent by collective action, using government-built infrastructure. The classic explanation is “The Myth of Rugged American Individualism“, Charles A. Beard, Harper’s, December 1931. It’s as appropriate today as when written during the Depression. Excerpt:

This is only one of the many straws in the wind indicating a movement to exult rugged individualism into a national taboo beyond the reach of inquiring minds. From day to day it becomes increasingly evident that some of our economic leaders are using the phase as an excuse for avoiding responsibility, for laying the present depression on “government interference,” and seeking to avoid certain forms of taxation and regulation that they do not find to their interest.

For a more recent look at this myth see: “Mitt Romney and the myth of self-created millionaires“, George Monbiot, op-ed in The Guardian, 24 September 2012 — “The parasitical ultra-rich often deny the role of others in the acquisition of their wealth – and even seek to punish them for it”

(4) For more information

(a) For more information about inequality of wealth and income in America:

Such a decline had implications for the distribution of incomes. Labor income is more evenly distributed across U.S. households than capital income, while a disproportionately large share of capital income accrues to the top income households. As the share that is more evenly distributed declined and the share that is more concentrated at the top rose, total income became less evenly distributed and more concentrated at the top. As a result, total income inequality rose.

(b) Posts about inequality and social mobility: once strengths, now weaknesses:

48 thoughts on “How clearly do we see the rising inequality in America? How do we feel about it? Much depends on these answers.”

The reason is simple. America is a nation of craven bully-worshipers. Each American today will eagerly volunteer to live in a cardboard box under a freeway overpass roasting sparrows on a curtain rod just as long as they can be certain that “those people” (blacks, feminists, liberals, hispanics, asians, fill in the blank with desired scapegoat) will also live under a freeway overpass but will lack both the cardboard box and the curtain rod.

If you take a look at charitable giving as a percentage of income you’ll find that the poor donate much more of disposable cash and free time than the wealthy. I believe that it is because the working poor live much closer to those who need that kind of aid and understand that they are only one stroke of fate away from needing those services as well. Indeed, it is likely that they may have relied on such services in the recent past.

The wealthy tend to exclusively look at charitable giving as a tax advantage in spite of the startling turnover of who is wealthy per FM’s comment about a 50% turnover every 10 years in who is wealthy.

I’ve known some of people who were wealthy and now are not. Most of them are small business people who made wrong decisions, usually about the 2008 financial crisis. A lot of them have gone from fancy vacations and nice houses to scrambling to put food on their tables. But oddly, they don’t tend to resent or regret their choices and they have fond memories of the old days but live the the current reality.

I don’t believe More’s statement is correct as a description of some beliefs in today’s America, but it accurately describes that of the 19th century South leadership. White supremacy was considered the glue holding America apart, creating solidarity among the many groups of whites — who would otherwise have little in common.

So Americans want to make more money, but they don’t want to be “rich”, because “rich” people are stuck up and dishonest.

A few of the national election polls I’ve been reading recently make me think this is a major difference between the public perception of Obama and Romney. Obama may have a lot of money, but Romney is “rich”.
So some will still vote for Romney even if they don’t like him personally, but then it’s just because they’re hoping for some of that magical ‘economy juice’ to leak out of his pores and trickle down onto them. Perhaps Americans’ political support for the “rich” guy is like Homer Simpson being nice to Mr Burns in the hopes of getting a raise.

“So Americans … don’t want to be “rich”, because “rich” people are stuck up and dishonest.”

This is a don’t make stuff up zone. Can you support that statement? While probably some people believe that (you could say “some Americans” or “a few”), it is absurd as stated.

“So some will still vote for Romney even if they don’t like him personally, but then it’s just because they’re hoping for some of that magical ‘economy juice’ to leak out of his pores and trickle down onto them.”

Fabius, my comment is an analysis of parts of your article, specifically these parts:

“One poll found 63% agreeing that the spending of millionaires gives “employment to a lot of people,” with 23% not agreeing, and 68% agreeing that investments help “create jobs and provide prosperity,” with 19% disagreeing.”
“78% believe them more likely to be snobs, 66% less likely to be honest.”
“They note that people … would like to be relatively better off than they are, but not necessarily rich.”

The second part of my comment is extending the analysis into the context of current national politics, specifically the Presidential election.

I do think it’s a bit odd that close to half the country wants to vote for Mr Burns, and I think these sort of polls and analysis help us to understand why. What do you think?

No time for a full reply. I’ll say these things have to get the details right, or our discussion — and thinking — quickly runs into the ditch.

Post: “52% believe the rich are no happier than they are, with only 11% thinking the rich are happier, and 35%, less happy. … people might prefer to be rich because it would provide better benefits for their children, or that they would like to be relatively better off than they are, but not necessarily rich. ”
—- is not the same as saying:
Comment: “but they don’t want to be “rich”, because “rich” people are stuck up and dishonest.”

As for “So some will still vote for Romney even if they don’t like him personally, but then it’s just because they’re hoping for some of that magical ‘economy juice’ to leak out of his pores and trickle down onto them”. It sounds absurd to me. That doesn’t mean its false, but I’d like to see some evidence. Who says such a thing? That would be a good start.

While “redistribution” to the middle class is IMO a questionable goal, its not so to the poor and needy. Hence I find Don’s statement morally repugnant. It takes us back to an earlier time, which most of us have moved beyond.

“Are there no prisons?” asked Scrooge.
“Plenty of prisons,” said the gentleman, laying down the pen again.
“And the Union workhouses?” demanded Scrooge. “Are they still in operation?”
“They are. Still,” returned the gentleman, “ I wish I could say they were not.”
“The Treadmill and the Poor Law are in full vigour, then?” said Scrooge.
“Both very busy, sir.”
“Oh! I was afraid, from what you said at first, that something had occurred to stop them in their useful course,” said Scrooge. “I’m very glad to hear it.”

Actually, since many of the people who voice the kind of sentiments that Don has also claim to be Christians and insist that this is — or at least was supposed to be and ought to be — a Christian country, perhaps we should go back even earlier (much earlier):

“Then the King will say to those on his right, ‘Come, you who are blessed by my Father; take your inheritance, the kingdom prepared for you since the creation of the world. For I was hungry and you gave me something to eat, I was thirsty and you gave me something to drink, I was a stranger and you invited me in, I needed clothes and you clothed me, I was sick and you looked after me, I was in prison and you came to visit me.’

“Then the righteous will answer him, ‘Lord, when did we see you hungry and feed you, or thirsty and give you something to drink? When did we see you a stranger and invite you in, or needing clothes and clothe you? When did we see you sick or in prison and go to visit you?’

“The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’

“Then he will say to those on his left, ‘Depart from me, you who are cursed, into the eternal fire prepared for the devil and his angels. For I was hungry and you gave me nothing to eat, I was thirsty and you gave me nothing to drink, I was a stranger and you did not invite me in, I needed clothes and you did not clothe me, I was sick and in prison and you did not look after me.’

“They also will answer, ‘Lord, when did we see you hungry or thirsty or a stranger or needing clothes or sick or in prison, and did not help you?’

“He will reply, ‘Truly I tell you, whatever you did not do for one of the least of these, you did not do for me.’ (Matthew 25:34-45)

Or even more simply:

Do to others as you would have them do to you. (Luke 6:31 — also see Matthew 7:12)

It’s ironic that a lot of conservative Christians in this country take pride in being able to quote chapter and verse from memory, when some of them make it all too clear that they have no more understanding of what they’ve quoted than a talking parrot taught to do the same would — talk is cheap but actions speak louder than words, after all. Another source of irony lies in the fact that the New Testament repeatedly warns Christians not to become preoccupied with material things — but it unfortunately appears that the American church is in many respects being hijacked by nationalists, Dominionists, neo-Libertarians, plutocrats, self-appointed Pharisees whose behavior suggests that the gospel they truly follow is not the one from the New Testament. (Then again — sadly — American culture has never been all that fond of self-reflection, not even in colonial times when Massachusetts was a theocracy under the Puritans.) Of course, one of the problems with religion — or rather, with human nature — is that far too many people put the cart before the horse and try to twist the principles of their (supposed) faith to fit the demands of their ego instead of twisting the demands of the ego to fit the principles of their faith as they’re supposed to do.

Nicely said. This is of course a long theme in western history. Our elites aggregate wealth by oppressing the poor (including children) wage merciless wars for gain — and consider themselves followers of Jesus.

Particularly in light of your response, it seems worth reinforcing the point that Plato made earlier — the socioeconomic group in this country which donates more of its free time and disposable income is actually not the one that has the most money. Assuming that the reports to which Plato refers are accurate — I’ve seen some which claim that the middle class and not the poor are the ones responsible for the most charitable giving — the people who are donating the most in terms of their money and their energy are not the ones who can most easily afford it. Quite the contrary…they’re the ones who can least afford it. Granted, not all charitable giving (whether of time or money) is genuinely prompted by a spirit of altruism in which the person gives without any expectation of return (which is the true spirit of giving)

What many people in this country evidently fail to understand is that 50% of people in this country make less than $30K per year (the individual median income is somewhere between $25K and $30K per year) from which they must find a way to pay for the basics — food, shelter, utilities (heat/water/electricity), clothing, telephone, transportation, child care if applicable (and it usually is), health care (especially since growing numbers of employers either provide no benefits at all or expect employees to pay an increasing percentage of them), insurance (car/fire/life/health/etc.), and saving for retirement and/or college for their children (that is, if there’s anything left over). Then there’s charitable giving on top of that…and this is still before you factor in elements such as the worrying statistics on wage theft in which unscrupulous employers withhold wages to which their employees are entitled, such as overtime. (The National Employment Law Project conducted a study on this several years ago, and the results were quite disturbing — particularly the findings regarding the incidence of threatened retaliation against workers who protest.) And these are the people whom the right wing would have us believe are lazy, greedy, selfish, shiftless, workshy, and morally inferior?????????????

Um…no. Not so. Some, yes…but there are people like that at every level of society, and this is not true of the majority. This is nothing more than a self-serving excuse in order to justify the continued exploitation of the poor (as well as a lingering inheritance from our Puritan forebears, who believed that poverty was an indication of divine punishment for unacknowledged sin and/or an insufficiently upright character).

It all depends on where you’re standing and what your ethics, your values, and your principles really are. If you’re the kind of person who believes that self-interest is the only ethical imperative, that material wealth is the only meaningful measure of a person’s worth, and that manual/physical labor doesn’t really count as working or making a contribution to society…then I suppose you would look down on the poor as unworthy of consideration. However, in my opinion — as well as that of most of the world’s spiritual philosophies — such a person may be physically wealthy yet bankrupt morally, socially, emotionally, and spiritually.

Actually, your reference to oppression by the wealthy reminds me of a film which I downloaded recently from Vodo.net (Vodo makes independent films available for free under a Creative Commons license). The film is called “ENDCIV”. Regardless of whether you agree with the overall message or not, because the subject matter is extremely controversial (I’m usually very open-minded, but even I found it a bit hard to swallow), the film makes one extremely incisive point…most people in this culture are not aware of the level of violence, physical and/or emotional, on which a lot of our society actually rests (violence against other nations, violence against the environment, violence against animals, violence against each other, violence even against ourselves). Part of this blindness is inflicted upon us from outside, from the media and the corporations and the government which keep this violence hidden from us and do not want us to see it — but part of this blindness is also internal, because becoming consciously aware of it and recognizing it for what it is would probably mean feeling compelled to do something about it (which would probably involve making sacrifices, something to which American culture has become unaccustomed and generally opposed).

Redistribution to the Middle Class: I guess we’re ignoring Social Security. OK. Who is going to do this redistribution? Answer: The Political class, composed of people known to be criminals, to their fellow criminals. Who’s chief target by the way happens to be the Middle Class. The small business middle class is shrinking because it’s being squeezed to death, as the upper working class in the Rustbelt was annihilated prior. What happened in the Rust Belt was the Morgenthau Plan applied to America’s – and the Worlds – richest industrial region. Perhaps we should not ask the same people to redistribute more wealth, especially as the nations 7 richest ZIP codes are concentrated along the Beltway. Where do you think this redistributed Middle Class – small business that is – wealth is going to end up? Where it is now.

The only Class Warfare really going on politically in America is the transfer of wealth from the “S” Tax return middle class to the GS Middle Class, and their partners the Contractors.

“Redistribution to the Middle Class: I guess we’re ignoring Social Security.”

No, we’re not. People come to different conclusions depending on how widely they cast their net over costs & benefits (also if on a static or full life-cycle basis), starting with the idiotic “count income taxes only”. But most analysis find that the middle class is on a net basis neither a significant payer or beneficiary from the government. There is redistribution from the rich to the poor, although not on a large scale. The bottom 20% get, from memory, only 4% of total US household income from all sources — while the top 1% get roughly 20%, and the top 20% aprox half of all income.

Bluestocking, it is likely that the middle class donates more than the poor as the middle class has many more resources than the poor. I was speaking of the percentage of disposable wealth, which is tiny for the poor.

Don, the simplicity of your worldview is impressive. I hope reality never makes you suffer for it.

Redistribution in capitalist system is not an evil, it’s a requirement! The normal flow of capital will result in some flowing to the top as profit on each cycle. It if just sits their as stocks, bonds, real estate and other illiquid assets, it will eventually reduce the supply and flow of capital in the middle and bottom. This will result in a slow down of activity leading to deflation.

After the last plague in Europe, the scarcity of labor drove up it price, and the result was the Renaissance. Henry Ford recognized this when he gave a large raise to his workers at the Rouge River Plant to stimulate sales, the result being the largest auto maker in the world. FDR’s numerous programs made such redistribution the law of the land, and gave us forty years of solid growth!

Redistribution of wealth has a solid, very positive history. There was never a crisis in the history of mankind that can be linked to the poor having too much money, or the rich not being rich enough.

To Fabius: economics is philosophy. Hence much of it is fantasy. Mind you it has taken on aspects of a Civil Religion, complete with the auguries and entrails. And sacrifices. However if you hold up your 2 hands [I presume] you will have the answers to why it can never be called a science. Your Left Hand is Human Frailty – or Concupiscence – and your Right Hand is Free Will. No tyranny of any stripe will ever stop either although they can twist and thwart their efforts.

All you envious schemers also need to confront present reality: your government are criminals whose sole talent is bettering themselves at others expense. Amongst their own councils and social gatherings, or indeed if you know anyone in government especially in DC all pretenses of this have been dropped. If you’re in government and you’re not corrupt you should leave. You’d be happier someplace else. So no…you can’t have a minimum income off my labors. Bums.

I’ll apologize in advance… I meant to right a brief(er) reply, but I screwed it up. Sorry!

I remember growing up nobody thought in terms of income inequality. Everyone seemed to be doing fine. Even working class people had second homes, and shared them with friends. I recalled spending a week at the So-in-so’s place at the lake one summer, then the Who’sits place at the beach the next. People were all seaming well paid, and if some people got more, well, they must be smarter (being smart was still a virtue, but not too smart). And then there was the “Christmas Bonus” season. Actually, it was profit sharing season, but “Christmas Bonus” sounded so much more generous and altruistic. One months salary seemed the minimum, but for many people it was much more, and for a few, it was the season for new cars, new furniture, new snow mobiles and family vacations in Florida. The vast majority of kids growing up these days probably don’t talk much about their parents “Christmas Bonus”. Today, it seems, people count themselves lucky if they get a little more than the mere $50 gift card for the local Kroger chain.

What was different, then versus now? Many things. America was more confidant. The best goods in the world were made right here. America was more egalitarian. We believed freedom was a right, and everyone had a right to be free, even if we had to acknowledge it kicking and screaming (most were perhaps ambivalent on colored voting, but no one thought they should be beaten for trying). America was self sufficient. Energy, materials, goods, and most importantly, ideas. But there was also a history of progress at the National level which has largly been undone. Why?

Unions had power, though their impact is usually way overstated. Unions where a double edge sword, for sure, but on the whole they probably did more good then harm. While most American workers were never in unions, most benefited from there existence in that they set a floor for benefit packages like health insurance, vacation and sick pay, work hours, overtime pay and the like. They also represented a counter point at election time to the money of the affluent, allowing for political candidates who were actually representing the working people of their districts, not the high bidder from K Street. Yes, there was corruption. But I would rather the corruption that protected jobs at the local factory, rather then the corruption that funds paramilitary police forces to break up workers protest outside of yet another factory moving to China!

Government Regulations are another. Airlines, telecommunications, banking and finance, public utilities and such where much more heavily regulated. Regulations too, where a double edge sword. The Internet is probably owes as much to deregulation as to DARPA for it’s existence, and for all the turmoil in the aviation sector, It is cheaper to fly today then it was in the 70’s. But then there’s the deregulation that led to Enron and other parasitic utility companies. And do I even need to mention the problems with Bank and Finance deregulation? And now the gloves are off on campaign finance…

Cable TV is another. When I was a kid, we had three networks and Public Television, and a couple of independent channels, Broadcasting stopped from midnight to 6 AM, and the summers where for re-runs. It was quite literally the case that there was often “Nothing On”.Since that time, we have added two broadcast networks, in English, and many more in other languages. And then there is Cable TV. 24 Hours a day, seven days a week, 52 weeks a year, they have something on. And now TV can come in over the internet.People today sit passively in front of their many screens far more then ever, absorbing vacuous “Reality TV”, the babbling idiocracy of talk shows and news programming that amounts to little more then carefully scripted propaganda. Propaganda that tells the viewer not merely ‘what’ they should be concerned with (and, by it’s exclusion, what they should avoid thinking about!), but ‘how’ they should feel about it, often by means of carefully crafted polls of their peers opinions. While it may be true that TV sets are cheaper today then they were 40 years ago, watching TV has never been pricier, Or costlier!

One thing not so different was turmoil and change. Except, it was very different in one way. America was still on a national high. We had built a world wide coalition and defeated the Germans and the Japanese, and then rebuilt built them as democracies like us. We held the line on Communism and were the “Arsenal of Democracy”. We had achieved the highest standard of living,ever, and for the most people, EVER! We had even sent men to the Moon! And not one, but two landers to Mars! The baby boom generation had known almost thirty years of unrelenting supremacy and progress. But all good things…

Much of the turmoil had to do with the upward mobility of the working class. Some had to do with the unfinished business of the Civil War (on both sides). Equal rights, civil rights, voting rights, states rights, the Nanny State (remember “Busing?”), all fueled many a public display which all found distressing, no matter what their position. And then there was the increasingly confusing and frustrating wars in Southeast Asia. There were many a pot boiling on the stove, and then the oven door was blown off!

The Oil Shock was the straw the broke the back of Liberal Democracy. We were the greatest people on Earth, the Greatest Nation EVER! Who were these “towel heads” and “sand n*r’s” to hold us hostage. Our social cohesion was already stressed, and now this strike at our political identity and ideals. And, in the decade that was the 70’s, it was just getting started. For all the blood and treasure spent, Southeast Asia fell, numerous African nations went Red, Communist were on the rise in Europe, the Panama Canal was given up, even little Cuba was throwing it’s weight around and giving us the Bird! And at home, sluts were getting free abortions, colored folk were getting upity, the kids were doing weird drugs that made them gay, and finally, dogs and cats were living together, and oh yeah, Time Magazine declared God was Dead!!

SOMEBODY HAS TO DO SOMETHING!!!

And somebody was waiting, in the wings, silently. The disciples of Leo Strauss and Friedrich Hayek, progenitors of the neo-conservative politicians and the neo-liberal economist (the Neo-X’s). They had offered there services to the American Aristocracy that had had it’s wings clipped by FDR so severely. The first steps were tentative, but they gathered momentum during the 70’s. Every riot, every protest, every international incident that shook the American Aristocracy gave them more power.

Looking back, it’s hard to tell incident from instigation. Neo-Cons have a particular fondness for the “False Flag” operation. We all know about the “October Surprise” negotiations that tanked Jimmy Carter, the FBI “Agent Provocateurs” that infiltrated domestic groups to instigate more violent protest, and who on the staff of Time cleared the God is Dead story? But what about the Oil Shock itself? Instigated largely by the Saudis and their Saudi-Aramco (Aramco stands ARabian AMerican oil COmpany… look it up), who benefited the most from the crises? The texas oil wells of the American Aristocracy had quadrupled in value overnight. The Saudi oil wells were owned in part by the same American Aristocracy. There will probably never be a smoking gun, but you got to wonder.

But the big gain, apart from all the money, was a traumatized American Public. “Further, the process of transformation, even if it brings revolutionary change, is likely to be a long one, absent some catastrophic and catalyzing event––like a new Pearl Harbor” (Project for the New American Century, 09/00). Put into words at the end of the Clinton years, this acknowledgement of crises as a prerequisite to change goes back to Strauss. And the 70’s seamed like a torturous roller coaster ride from crisis to crisis. The Government was to blame! Liberals were to blame! Adulterers were to blame! Foreigners were to blame! Abortionist were to blame! Regulations were to blame! Taxes were to blame…

Which brings us to the biggest change between now and the 70’s, and the one that is almost never mentioned (except by idiots like me who seem to get off beating our heads against walls!) was a 70% top tax bracket. Starting with Jimmy Carter (no, not Reagan!) the top bracket on earned income was cut from 70% to 50% Reagan then cut it all the way down to 28% before they had to bounce it back up to 38%. It was ‘supposed” to spur investment and create jobs, but 35 years into the experiment, it has obviously done the opposite.

And why not? Yes, Milton Friedman among others did a good job on selling people on how all this trickle down was supposed to work, but let’s face it; They were either idiots, or they were liars. Period. The message to the ‘investor class’ was said to be “Here is more of the money you earned, go out out and invest!” What they obviously heard was “Here is more Money… It’s yours, get something nice, and don’t forget to tip your Senators and Congressmen!”

The glass ceiling imposed by FDR was busted through. Profit sharing and Christmas Bonuses started shrinking (It’s the economy, sorry). Mergers and acquisitions took off, and most of the small innovative companies that kept America on the leading edge got bought up up by large companies just beginning to become the dreaded “Multinationals”. Wages were cut and unions busted as increasingly redundant workers scrambled for the remaining jobs, such as they were. Later, with the help of all their tips to their Senators and Congressmen, these jobs were moved to
Mexico, then to China. And all the while, the incomes of the top 1%, the American Aristocracy, exploded.

At the same time, we saw the launching of the “Aspirational Economy”. We saw sports stars and movie stars getting multi-million dollar contracts. Most insidiously of all, we saw the Rise of the Lotteries”! At a time when upward mobility was being crushed the most, one could have sworn that it was easier than ever to become rich. Anyone, at any time, regardless of their back ground, whether by hard work or shit luck, could become a millionaire. The intended message, of course, was “This could be you! You could be rich! For gods sake, don’t screw yourself and vote for higher taxes!”

SOMEBODY PLEASE DO SOMETHING!!!

All of this extra money, the money that is not paid in taxes and is not paid in wages, the money that continually compounds itself in further “cost savings” and “cost reductions” and “further efficiency”, winds up in fewer and fewer hands as time goes on, stagnating the economy and poisoning the body politic as our infrastructure declines to rust.

The American Public is hopelessly confused and demoralized after 40 or so years of this bullshit. And on top of everything we’ve done to ourselves politically and financially, we now have to deal with resource depletion and climate change. Problems which, if we had our shit together, would not be problems, but oportunituies. But we don’t have our shit together.

And all the while our liberties are being sacrificed. Not at the alter of safety, as they would have you believe, but for their own convenience. All the while the Military and para-military forces are reinforced, not to protect us from terrorist as they say, but to protect them, from there greatest terror… us.

Parts of the coming dictatorship are already in place. There may yet be something that could be done, but I have the feeling that if we tried, the would simply crank up this crisis machine, and Caesar would cross the Rubicon a little early.

I wanted to add something about the 70% bracket, because it was obviously a thought not put down above…

….What they obviously heard was “Here is more Money… It’s yours, get something nice, and don’t forget to tip your Senators and Congressmen!”

What the 70% tax bracket meant for most Americans was Profit Sharing, though they probably never saw it as such. While there were plenty of deductions back then, at a certain point, pushing for more became an exercise in futility. So rather then paying the government a dollar or more for every dollar in pocket, they “Gave Away” excess profits. They gave it to charities, to schools, to churches, but mostly they gave it to employees as “Bonuses”. This created a ceiling above which incomes could not easily rise, but also redistributed wealth and gave us prosperity and a middle class.

IIRC, the 70% bracket kicked in at about $6 million in adjusted gross income. A lot more things were deductible back then, so $6 million AGR would have actually represented a much higher gross income. Even after write-off and right-downs and various a sundry deductions, the effective tax rate for the top 1% in the 70’s came in just above 50%, including FICA. In comparison, the typical American (mean income $50K) today pays 28% income and 7.5% FICA, for a 36% rate, so it was hardly unfair. And was this a deterrent to growth or job creation? Hardly. The economy produced better jobs and employment rates were higher in this country when the tax rates where higher.

When it comes to economics, we tend to individually apply greedy algorithms (http://en.wikipedia.org/wiki/Greedy_algorithm) to optimize our positions. That means a company will always choose the cheapest source of labor, and a consumer will always choose the least expensive product. Greedy algorithms, though will not find the global optimum. When one company finds a cheap source of labor its a windfall for them, but when every company hops on board, they collectively destroy their consumer base. Likewise, when one consumer chooses a cheaper imported product, its a bargain, but when the whole country hops on board, they collectively put themselves out of a job.The growing income disparity since the 1970’s is a symptom of a growing long term problem that has not yet fully evolved. As long as the upper income groups continue to see their incomes rise and consumers continue to see prices fall, they will believe they are making the right choices.

The greedy algorithm. It’s a canard like Ricardian equivalence. Sure it sounds all good and stuff, but it’s true purpose is to provide theoretical structures to hide avarice and arogance behind. It’s junk economics. If it were true, everybody would shop at WalMart because they would want to. No. Nobody shops at WalMart because they want to… They Shop at WalMart because they have to!

The same goes for car shopping. Cars in America, and most of the world I should think, are symbols of status, taste and personal achievement. Americans tend to by the most car they can reasonably (or even unreasonably) afford. I lived I LA for many years and saw many a three peice suit step out of shiny new 300ZX in the carport of a North Hollywood hovel.

The greedy algorithm, et al, are little more than damning proof that Economics is no more a science than Alchemy.

I like that comment about Economics is no more science than Alchemy. The very defintion of economical is to do More with Less! is it not? Based on that I don’t know of any Economic theroy that is……well…. Economical. Is this wrong headed thinking?

To people who know nothing about economics, it might appear like alchemy. But then all sciences, no matter how great their accomplishments, look like magic to the ignorant.

I remember reading tracts in church denouncing biology and physics as false teachings. And hearing people talk about the easy jobs professional refs have. It’s a common human trait.

Such people think our global civilization, knit together with a financial structure of incredible complexity — producing global growth on a scale seldom if ever seen in history — just happened. Ignorance about the theoretical foundations leads people to believe that it doesn’t exist.

You make an excellent point, FM…one I’ve been ruminating on for awhile in relation to our current economic crisis.

One of the reasons for the present state of economic equality is the fact that the top 5% (and especially the top 1%) have most of their wealth tied up in investments whereas most of the rest of the population — meaning, the ones who have any discretionary income to speak of — have tended to invest in real estate, usually in the form of the family residence. From 1982 to 2000, the Dow Jones Industrial Average climbed by more than 1000% (from 776.92 in 1982 to 11722.90 in 2000) — a rise which has never been equaled before or since. What this means is that any investments purchased in 1982 and held until 2000 would have increased at least ten times in value due to the action of the market alone…but actually more than ten times due to the effects of compound interest. What was the reason for the jump? Well, at least two reasons for the jump were (at least in my opinion) the development of what I call the cult of wealth worship in this country and the availability of cheap credit.

One of the ways in which the development of wealth worship has been made evident in this country has been through television programming. Prior to the 1980’s, many of the popular television shows featured characters who were middle class or lower — Alice, All In The Family, Barney Miller, Good Times, Lou Grant, Maude, One Day At A Time, Rhoda, Sanford And Son, Welcome Back Kotter, etc. Beginning in the 80’s, a whole new genre of television drama began appearing in which the characters (whether fictional or nonfictional) were at least upper-middle class if not extremely wealthy — The Cosby Show, Dallas, Dynasty, L.A. Law, Lifestyles Of The Rich And Famous, etc. Even in the case of shows which depict ordinary middle-class characters (such as say, 21 Jump Street or Miami Vice), the settings in which these characters interacted sacrificed realism for visual aesthetics — supposedly, the original concept for Miami Vice was summed up in the phrase “MTV Cops” — with the result that many of these characters enjoyed a lifestyle that they probably wouldn’t have been able to afford in real life. With some exceptions (such as Roseanne and 2 Broke Girls), the message of wealth worship has succeeded in remaining a significant force in television programming from the 1980’s through the 90’s and into the present day.

This seems to have encouraged Americans to go out and spend more in an attempt to emulate what they were seeing on television…and cheap credit made it possible for people to create lifestyles which gave them the appearance of being significantly more affluent than they actually were. In previous periods of American history, living on credit was generally considered undesirable because it was usually either a sign of someone who was having trouble making ends meet or someone who was financially irresponsible. During the 80’s and later, living on credit and buying more than you can afford actually became the norm to the point that perhaps as many as 75% of American families were at least $1000 in debt prior to the Great Recession and the housing crisis. Of course, since debt accrues interest, living on credit provided a boost to the economy — because in addition to the money paid to purchase goods, the interest paid on the money borrowed to purchase them also went back into the economy.

What’s ironic about this is that now, a lot of the members of the right wing (particularly those who are wealthy) are extremely critical of those who were living on credit during most of the 90’s and 00’s for failing to take “personal responsibility”…when the fact is that they themselves would probably not be so wealthy today (perhaps not nearly so wealthy) if these people had taken the opposite path and lived within their means. It’s also possible that the people who were living on credit would be better off themselves if they had not done so, since increasing economic inequality has given the wealthy significant political leverage over ordinary Americans.

“To people who know nothing about economics, it might appear like alchemy. But then all sciences, no matter how great their accomplishments, look like magic to the ignorant. I remember reading tracts in church denouncing biology and physics as false teachings…”

I would dare say in the past 35 years we have all received an education in Economics. I haven’t received a formal education in witchcraft, exorcism, or astrology, either, but I’m pretty sure they’re bunk, too. And over the years, purple clad pontifexii have railed at many things, including O***ism. In and of itself, papal censure does not justify granting it the status of a science.

Economics has over it’s history (and it’s not a very long history) produced little more than opinion pieces designed to rationalize and/or justify actions of the days ruling aristocracy. Occasionally, opinion pieces would come out which produced critiques and challenges to the ruling aristocracy that seemed brilliant or inspired, but that was just because it matched the current popular trends. Some contained copious amounts of pertinent historical data, some a generous amount of jargon, some links back to real sciences and maybe even a few equations. That doesn’t make it a science, just “sciency”.

Economics is, at best, a study of interactions between humans and the value systems they have created. It is derivative of the fields of anthropology and psychology. That it is seen as a a field of study in its own right says more about modern mans obsession with ‘money as wealth’ then its accomplishments. To be a science, it would need to be able to produce hypothesis, make predictions, test them, and either prove or disprove them. And the results need to be reproducible. A theory which produces a successful result only once is a failure.

If economics were a science, it would have had to admit when its hypotheses were wrong, and go back to the drawing board. I have never seen an economist admit they were wrong. Instead, we get a litany of excuses and demands; further tax cuts or greater tax increases; more austerity or more stimulus; less regulation or more controls; more interventions or less interference. Then there’s the ubiquitous finger pointing at the workers or consumers who are cheating or just ‘doing it wrong’! But never, ever a mia culpa. Seriously, that is no way to run a science.

His idea in a short form is….. industry/production bun by engineers/science is better then when it run by the vulture capitalist. He also new a great deal aboufinancialil crimes and criminals before it was called white collar crime.

We need a minimum income instead of a minimum wage. A basic yearly income to every citizen who could then go a purchase all the goods and services he/she needed. We could then shut down all these government programs and save a lot of money but still raise the overall level of prosperity. This has been talked before by both parties but has only been implemented in a halfway fashion through tax policy.

To be added to the Economic Lexicon – “Concupiscience: The never satiated desire to draw as much of reality as possible into one’s self; the unlimited striving, for example, for knowledge, sex, and power. The seeking for one’s own pleasure through another being without the desire to unite with, affirm, or love the other being. ” This is virtually the definition of our political economics.

What about a negative income tax where everyone is guaranteed a certain amount per year up until they start earning more? I believe Milton Freedman was in favor of it as a way of guaranteeing a certain standard of living while cutting actually getting the money to those who need it without them having to go through a million bureaucratic federal and state programs.

While there were concerns that it would incentivize the working poor to stop working because they would now have a guaranteed minimum income, I think that it might be necessary regardless as things progress. Contemporary economic systems are moving towards more and more automation and in many cases the jobs are simply not coming back. I believe we can have a very dynamic and innovative economy in the future, but we are in a transition period where far too many people have skills that are simply not in demand and it will take quite some time to retrain and educate them for whatever might come next.

In the meantime, the nature of an information technology based economy means that those who are able to innovate receive an increasingly larger share of the wealth (ala the founders of Google) while everyone else barely knows how to operate a computer and thus gets left behind. In order to avoid massive social and economic instability, I think we are simply going to have to have “redistribution” in some sense to make sure people have a bear minimum standard of living and can act as the consumers can keep the economic wheel spinning.

Seems to me, that a negative income tax would be a good way to do this across the board without having to go in and regulate for higher wages, increased education spending, healthcare, and so on.

Employers would be strongly tempted to _reduce_ salaries by the amount of the negative income tax, so as to improve their margins, since they can assume that the negative income tax will anyway bring back employees’ incomes to their original level.

The perverse effects of subsidies that are not accompanied by other measures have been demonstrated for a long time.

Another example is given by countries that give advantages to home buyers (e.g. special tax rebates or subsidies for energy-efficient renovations), only to see the price level of real estate rise by the amount of the fiscal advantage (and drop likewise when the fiscal provision expires).

I am not so sure that employers would cut salaries because they would indirectly be raising their own company/business income tax. The idea was to raise peoples pay and their tax bracket to the positive side and when this was done the taxes on business would decrease. At least that was the idea as I remember it.

I am middle class. I’m well aware of who “the Rich” are that are going to get fleeced. Me. And I won’t even bust 100K this year. While you’re educating yourselves on economics do google “Letter of Tax Opinion”. That’s the actual tax code for the actual rich. Written for them individually by White Law shoe Tax firms. Our issues I think you’ll find are not with taxes, they’re with Privilege. Barring Revolution the Rich pay literally what they have written into the Tax Code, they’ll be just fine. Especially if they’re the favored, connected Rich. Your social engineering schemes predictably play into the hands of the successfully conniving , while squashing the talented and aspiring. No wonder Singapore beckons or for that matter Uruguay.

Once again the actual Class Warfare taking place is GS [Government pay scale rating] vs S returns – the small businessman. Of which thankfully I am not, I work for a huge multinational.

Don’t fret. We can post back and forth about what should be, but the system has by now been so rig as to guarantee nothing will change. It will stay pretty much the way it is, even if they have to start bringing in troops every other week or so.

Nothing will change, except that more and more people will begin to wish it had.

Dear Frank: Thank you for your reply. Here is why you’re wrong nothing will change. On the same note – I predict the upper level for QE^Infinity is 3.25 Quadrillion in 2009 dollars. Behold fundamental change in action..

Why do people comment on technical subjects about which they know nothing? My guess is that because their minds are filled with nonsense from Fox etc.

$40 billion per month in new funds is not a large sum, especially since much will remain inactive (monetary velocity is dropping fast) If the economy continues slowing at the present rate, we’ll have many really serious problems long before the money supply reaches too high levels.

Frank offers us another example of “learned helplessness.” The oligarchs who have spoon-fed him that propaganda via K-12 schoolroom textbooks and TV and talk radio and bestselling novels and blockbuster movies are doubtless laughing all the way to the bank.

Learned helplessness? Please. It’s not helplessness, it’s entropy. What goes up, must come down. All good things come to an end. The only thing certain in life is death and taxes. Is that being fatalistic, or realistic?

Did you ever consider that the term “learned helplessness” is just a device created by a propagandist to rationalize the failure of their favorite platform to gain acceptance or achieve success? That it is as silly as the term “techno-optimism”? That, perhaps, the oligarchs responsible for your education deliberately omitted the coarse on critical thinking?

FM remarks: To people who know nothing about economics, it might appear like alchemy. But then all sciences, no matter how great their accomplishments, look like magic to the ignorant.

Depends what kind of economics you’re talking about. John Maynard Keynes’ General Theory macroeconomics of 1936 as supplemented and modified by Knut Wicksell and Irving Fisher has held up well against the test of reality. Post-1960s neoliberal spontaneous equilibrium macroeconomic theory as peddled by the Chicago School of Economics, not so much.

Looking back the general history books show only a “Whig history” version of science — a triumphal linear march of progress. In fact there are many dead ends, some pursued at considerable length and effort.

Science is just a process employed by people. Like democracy, with which it shares some features, it works in a fitful uneven fashion.

In case my previous comment was not clear, this statement is false — a basic misunderstanding of the nature of science.

Even the Austrian school, one of the least testable and quantitative of current economic theories, is in many ways a science. Many of the objections to it also are made to string theory in physics (rightly or wrongly in either case only time will tell).